  Apart from mean-variance portfolio optimization, one must consider and incorporate transaction costs associated with shifting portfolio asset weights into the profit estimation to properly characterize a strategy as successful. The turnover rate (TR) can be considered the rate at which investment capital within a portfolio is moved from asset to asset when comparing a prior period to a future period of time. The definition of TR is given as the following:
  
\begin{equation}
TR(t+1)= \frac{\sum_{i=1}^6{|P_{i,t+1} - P_{i,t}|}}{\sum_{i=1}^6{|P_{i,t+1}|}}
\end{equation}

  By incorporating TR, portfolio optimization will include an additional parameter to optimize in order to increase net profits while reducing transaction costs.In order to achieve the goal of minimizing TR while maintaining portfolio profitability, an asset allocation strategy must be developed that utilizes portfolio optimization techniques, such as the Black-Litterman model, while employing cost-prohibitive discretion. 
  An absolute extreme strategy is to halt capital redistribution completely, which prevents transfer costs from being incurred. However, this strategy is not optimum since additional data and predictive measures may enable a portfolio manager to reposition investment capital in a more profitable distribution between assets that may yield higher returns with lower volatility. The opposite extreme strategy is to redistribute investment capital among assets frequently within a short time period. This will yield considerable transaction costs that has the potential to drastically reduce profits. 
  The TR calculation, however, is flawed. TR includes profits and losses as part of the turnover ratio. Spurious estimates of TR may be calculated even if asset weights remain the same. For example, a portfolio that never reallocates the distribution of capital between assets may have a high turnover ratio if it incurs a large profit or loss. Therefore, an estimate of turnover ratio related to changes in asset weights within a portfolio alone and not due to profit or losses attributable to market price fluctuation needs to be considered for a more accurate measure of transaction costs.